The Forgotten Man

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Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: Harper Perennial, 2007.

Summary

In The Forgotten Man, Amity Shlaes reexamines the history of the Great Depression and the effect of Hoover and Roosevelt’s policies to combat it. She begins the book by discussing the historiography and the misconceptions about the Depression, concluding that the idea that Hoover and the crash caused the Depression and that Roosevelt’s New Deal made it better is both untrue and a vast oversimplification. The crash was “a necessary correction of a too-high stock market, but not necessarily a disaster…There was indeed an annihilating event that followed the crash, one that Hoover never understood and Roosevelt understood incompletely: deflation.” (4) Shlaes argues that Hoover and Roosevelt are both at fault for prolonging and worsening the Depression by constantly experimenting with the economy rather than letting it naturally right itself. “From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.” (9)

Shlaes proceeds chronologically through the history of the Depression, focusing on major figures and grounding these figures contextually. She describes Hoover’s work during World War I and in the Department of Commerce, showing the reader that his experiences taught him the value of voluntary associations, which unfortunately was not enough to combat the Depression. Hoover encouraged business spending, in effect asking businesses to take the hit in profits rather than in employment or in wage costs, forcing down the value of company shares. The Hawley-Smoot tariff drove up the price of imports and made American good prohibitively expensive to foreign consumers. During Hoover’s administration, the actual money supply dropped, the Federal Reserve tightened, state-sponsored banks (not under Federal protection) went under, and towns began creating their own scrip just to have a money supply.

Roosevelt won the election of 1932 easily and Roosevelt immediately began experimenting with the economy. He accurately calculated that the appearance of motion would reassure the American people, many of whom felt that Hoover’s administration had done nothing to combat the Depression. Shlaes argues, though, that many of Roosevelt’s experiments were ultimately harmful to business and may have prolonged the Depression itself. She demonstrates that several of the lawsuits, against Samuel Insull and Andrew Mellon, for instance, were scapegoating. The lawsuit against Mellon in particular was based on the fact that Mellon had used legal tax loopholes that Roosevelt wanted to make illegal retroactively. Shlaes describes the NRA, the court-packing scheme, the development and changes in the Brain Trust, and the various tax laws all in great detail. The frequent New Deal attacks against big business, the extensive corporate taxes, and the utilities monopoly constructed by the TVA created a situation in which business was hesitant to invest in new equipment, job creation, or to take risks out of fear of federal government intrusion. Shlaes argues that Roosevelt’s experimenting likely prolonged the Depression and certainly increased the severity of it.

Shlaes’ history of the Depression extends to 1940 and the presidential campaign between Roosevelt and Wendell Willkie, whose Commonwealth and Southern utilities company was crushed under competition with the federally-backed Tennessee Valley Authority. Willkie was a viable candidate, but Roosevelt’s work during the New Deal, his creation of a block of voters (after 1936, Roosevelt specifically sought the support of farmers, big labor, pensioners, veterans, women, and blacks), and the fact that 1940 was a good year for the economy led to his victory. Shlaes writes that Roosevelt changed economics forever by creating the idea that blocks of voters could demand something from the government. Despite Roosevelt’s obvious successes, Shlaes argues that the story of the Great Depression is not one of Hoover’s failures and Roosevelt’s successes—rather, one must look at the consequences of the two presidents’ policies. She argues that both presidents prolonged the Depression by frequently tinkering with an economy that needed to right itself naturally.

Becky Erbelding, Spring 2010

Shlaes is convincing perhaps because her book makes economic history understandable and readable. It is difficult to understand and analyze the causes and effects of the Great Depression without understanding the economics behind it, and Shales describes this clearly for the non-economist reader. Her thesis is likewise convincing. Her chronology shows the frequency of new regulations, tariffs, and legislation put into effect in the Hoover and Roosevelt presidencies, lending credence to her argument that constant tinkering with the economy made business squeamish.

Shlaes specifically argues that both Hoover and Roosevelt "underestimated the strength of the American economy...[and] overestimated the value of planning." (6) It is difficult to determine whether Shales uses the word 'planning' to refer to the work of the National Planning Board that Patrick Reagan describes in Designing a New America. Though Reagan is certainly convincing in his description of the superb qualifications of Roosevelt's planners, Shales could be equally correct that it was precisely the result of this planning that caused so much upheaval. Both authors agree that the New Deal was transformative in American history, the difference seems to be in whether the immediate result was positive or negative.

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